unit3-2

Question 1

parts of a policy

Answer 1

DICEE
Declarations
Insuring agreements
Conditions
Endorsements and additional supplementary coverages
Exclusions

Question 2

what is found in the declarations section

Answer 2

information relative to who, what, when, and where

Question 3

what is found in the insuring agreement

Answer 3

promises made by insurance company and states what is covered

Question 4

what is the conditions section

Answer 4

states policy 1. provisions, 2. rules of conduct, 3. duties, and 4. obligations required for coverage

Question 5

what is the Endorsements section

Answer 5

add, modify or take away coverage

Question 6

Excusions section

Answer 6

take coverage away from the insuring agreement. ex: flood damage may be an exclusion in a policy

Question 7

additional/ supplementary coverage

Answer 7

payment for additional expenses not normally covered. may have separate limit of insurance

Question 8

unearned premiumn

Answer 8

unused premium paid in advanced will be returned to insured upon cancellation of policy

Question 9

money returned on a prorated basis if?

Answer 9

if the insurer cancels the insured’s policy

Question 10

short-rated basis

Answer 10

unearned premium returned on a short rate basis

surcharge or penalty for early cancellation. no advanced notice given by insured. partial refund of unearned premium

Question 11

flat cancellation

Answer 11

when a policy is canceled on the effective date by the insurer or insured

Question 12

what is cancellation

Answer 12

stop policy before expiration date. full refund given if give advanced notice (pro-rata)

Question 13

purpose of deductible

Answer 13

prevent small insurance claims and overuse of insurance claims

Question 14

what is nonconcurrence and where is it commonly seen?

Answer 14

two or more policies covering the same property but providing different or non-identical coverage. seen in commercial insurance policies

Question 15

Pro rata

Answer 15

each insurer’s liable for a portion of the loss

Question 16

formula for calculation pro rata

Answer 16

pro rata (determine % each policy contributes to the total amount or insurance)

policy limit of one company/ policy limit of all companies * loss

Question 17

contributions of equal shares

Answer 17

each policy pays the same up to the smallest policy limit to prevent gain (indemnity)

Question 18

provisions

Answer 18

conditions. list of duties and rights of both the named insured and the insurer

Question 19

Named Insured’s Duties After Loss

Answer 19

PPC MSC

1. Prompt notice to insurer
2. Protect property from further damage
3. Complete proof of loss (if asked)
4. Make property available for inspection
5. Submit to examination under oath if required
6. Cooperate with insurer

Question 20

policy can’t be transferred without what?

Answer 20

consent

Question 21

salvage

Answer 21

when insurance company takes possession of damaged property after payment of loss to sell for parts- can lower claim lost for insurance company

Question 22

liberalization

Answer 22

• extended coverage to insured
• no additional premium charged
• not action required by insured

Question 23

subrogation

Answer 23

transfer of right of recovery against others to us. insurer has the right to sue an at fault party for damages the insurer had to pay to the insured. common when at fault party does not have insurance.

Question 24

insurable interest

Answer 24

risk of financial loss

may be present at the time of application

must be present at time of loss

Question 25

underwriting

Answer 25

process of evaluating risk and exposures of potential clients

Question 26

who is responsible for field underwriting

Answer 26

the agent or producer. using pre-established criteria. seek out risk acceptable to companies

Question 27

what do underwriters do

Answer 27

decide whether to accept or reject applications sent in by producers or agents on the basis of company underwriting standards

Question 28

application

Answer 28

primary source of underwriting info

Question 29

binder

Answer 29

a.k.a temporary. oral or written statement made by the agent that gives the insured immediate coverage for a specified time

Question 30

3 ratios used to evaluate financial performance of an insurance company.

Answer 30

loss, expense, combined

loss = amount of incurred losses/amount of earned premium.

used to compare company’s operations from year to year.

shows the percentage of losses the company incurred for every dollar of earned premium

Question 31

indicator of the cost of doing business

Answer 31

expense ratio = underwriting expenses/ amount of written premium

Question 32

underwriting expenses

Answer 32

cost to acquire to keep policies. expenses include: advertising, commissions, salaries, administrative cost, regulatory cost such as taxes and licensing fees

Question 33

written premium

Answer 33

gross amount of premium income received from insureds

Question 34

combined ratio

Answer 34

sum of the loss ratio and the expense ration. 100%= breakeven point. greater than 100% is an underwriting profit.

Question 35

the amounts of coverage and limits of liability are found in what section of the policy

Answer 35

declarations

Question 36

the federal gov. is not obligated under the TIRA to make payments if losses exceed how much annually

Answer 36

100 billion

Question 37

when an insurance company cancels a policy, what is the method used to determine the premium due

Answer 37

pro rata

a short rate basis is used when the insured cancel the policy

Question 38

pro rate equation

Answer 38

policy limit A/(policy limit A+B)*loss= payment for policy A

Question 39

loss ratio

Answer 39

measure underwriting profitability

claim paid/ premiums received

lower ratio is better

Question 40

what does the insurer keep in a short-rate cancellation

Answer 40

all earned premium plus overhead expenses

Question 41

named insured vs first-named insured

Answer 41

named- who the policy is issued to

first-named- may assign a higher level or duties or rights to

Question 42

earned premium

Answer 42

amount of money that the insurance company makes by providing insurance for a designated period